Knockdown rebuild duplex to townhomes

[Gabor Szendrei]

Hey everyone,

I own a duplex that I'm in the process of paying off in the next couple years. When I do, rather than fixing it up (built in 1948), I'd like to knockdown and rebuild, but split the folio to convert it into 2 townhouses, then sell 1 townhouse to pay off the construction costs and have a new house paid for. Does anyone know how construction financing would work once we've paid our mortgage off? Similar converted townhomes in our area have sold recently for $800k - $1M+. Would the "ARV" of the improvements suffice for a lender, or would we need to come to the table with a % down, some amount of cash reserves, or other collateral? Any info on this or even on the duplex to townhome conversion process would be much appreciated. Just to be clear, I'm not looking for a lender, just info if anyone has experience that could pertain to my situation. Thanks!